Scrutinizing Developments in Texas Appellate Law

May 30, 2018

Texas Supreme Court Opinion Summaries — 5/25/18 Opinions

In its weekly orders on Friday, May 25, 2018, the Texas Supreme Court issued opinions in five argued cases. This leaves the Court with 22 cases to decide before the end of June if the Court is going to continue its trend of clearing out its docket each year before the summer recess. So, the next few Fridays will likely be busy. One common theme in these five cases is unanimity; there were no separate writings. That trend will likely change over the next month. Also, the Court has granted only two cases so far for next term, so there may be new grants to report on before the summer recess as well.

The cases from May 25 are:

No. 14-1057, Benge v. Williams — In this medical-malpractice case, the primary issues are (1) whether plaintiff's expert was qualified to testify and (2) whether the trial court should have instructed the jury not to consider the primary surgeon's failure to disclose that the resident who would be assisting with the surgery had never performed the procedure before when the plaintiff had conceded that this failure to disclose did not proximately cause her injuries. In a unanimous opinion by Chief Justice Hecht, the Supreme Court held that the expert was qualified to testify and that the trial court erred by failing to give the instruction requested by the surgeon. On the first issue, the surgeon argued that the plaintiff's expert was not qualified because he was not "practicing medicine" as defined by the Texas Medical Liability Act. The Court held that although the plaintiff's expert was not currently seeing patients, he was licensed in Texas, had extensive experience with the surgery at issue, was teaching at a school in South Korea, and was consulting with other physicians regarding the surgery at issue in the case. The Court reiterated that the TMLA's test for experts should not be too narrowly drawn and found there was sufficient evidence for the trial court to conclude that he was qualified to testify. On the second issue, the Court held that the trial court should have instructed the jury not to consider what the surgeon did or did not tell the patient about the resident who helped with the surgery, because the plaintiff expressly disclaimed any argument that the surgeon failed to obtain informed consent. Since the lack of disclosures about the resident was repeatedly mentioned during testimony and during the plaintiff's argument, the Court held that the jury could have found the surgeon negligent based on this theory that the plaintiff had disclaimed. Therefore, the failure to instruct the jury not to consider it was harmful under the reasoning of the Court's decision in Casteel and its progeny. Accordingly, the Court reversed the judgment and remanded for a new trial.

No. 16-0412, TRO-X, L.P. v. Anadarko Petroleum Corp. — In this oil and gas case, the Supreme Court held that when a lessor and lessee under an existing lease execute a new lease of the same mineral interests that are subject to the existing lease, the existing lease is terminated unless the new lease objectively demonstrates both parties’ intent otherwise. In 2007, TRO-X executed leases that contained offset-well clauses, requiring TRO-X to drill offset wells in certain circumstances and providing that if TRO-X failed to drill a required offset well, TRO-X had to release a specified portion of the land upon lessors' demand. TRO-X later transferred its interests in the 2007 Leases to Eagle Oil & Gas Co., subject to a “back-in” option if Eagle Oil reached a specified production payout. The transfer also contained an “anti-washout” clause that provided that TRO-X's back-in option would extend to any renewals, extensions, or top leases taken within one year of the termination of the current leases. Eagle Oil eventually assigned the 2007 Leases to Anadarko. Anadarko failed to drill a required offset will, and the lessors demanded Anadarko surrender the specified portion of the property. Anadarko concluded that due to the breach of the offset-well clause, the leases on the acreage the lessors demanded had terminated. Anadarko then entered into new leases with the lessors in June 2011 that covered the same interests as those that were covered by the 2007 Leases. The 2011 Leases did not mention the 2007 Leases or TRO-X's interest in the 2007 Leases, or contain language releasing the 2007 Leases. TRO-X sued Anadarko, arguing that the 2011 Leases were top leases and were therefore subject to TRO-X’s back-in interest. Much of the dispute centered on which party bore the burden to establish the nature of the 2011 Leases. In a unanimous opinion by Justice Johnson, the Court held that a party contending that a new lease did not terminate the previous lease has the burden to prove and obtain a finding that the parties intended for the previous lease to survive the execution of the new lease. The Court noted that the proof must be either specific language in the new lease objectively demonstrating that intent, or an ambiguity in the new lease as to the termination of the previous lease together with evidence that the parties did not intend the new lease to terminate the prior lease. Ultimately, the Court determined that TRO-X failed to show that the 2011 Leases contained language evidencing that the parties intended the 2007 Leases to survive the 2011 Leases’ execution. Therefore, the 2011 Leases were not top leases and they terminated the 2007 Leases.

No. 16-1005, Tarr v. Timberwood Park Owners Ass'n, Inc. — This case addresses whether short-term rentals of a house (such as through sites like VRBO or Airbnb) causes the owner to violate restrictive covenants that limit use of a property to single-family residences and that require that tracts be used solely for residential purposes. Petitioner Tarr listed his single-family home on VRBO and over a period of about five months entered into thirty-one short-term rental agreements of between one and seven days. He formed an LLC to manage the rentals and paid both state and local hotel taxes on the rental income. The homeowners association sent a notice asserting that his use of the house violated the single-family residence restriction. Tarr eventually sued the association for a declaratory judgment that his activities did not violate the restrictive covenants. In a unanimous opinion by Justice Brown, the Court held that Tarr did not violate the restrictive covenants. The Court declined to resolve an open issue regarding the historical, common-law approach to restrictive covenants (which holds that they must be strictly construed) and a statutory command in Property Code section 202.003(a) (which instructs that they be "liberally construed to give effect to [their] purposes and intent"). Under either construction, the Court concluded that there is no way to read the restrictive covenant here to bar short-term rentals. Because there was no dispute that Tarr's house was a "single-family residence," the Court found that his use did not violate the single-family residence restriction. The Court then construed "residential use" and found that it refers to the activities carried on by the occupants of the property. Because the restrictive covenants did not require the single-family residences to be owner-occupied or otherwise address leasing, use as vacation homes, short-term rentals or anything similar, the Court found that the covenants did not restrict Tarr's ability to engage in short-term rentals of the house.

No. 17-0130, Texas Workforce Comm'n v. Wichita County, Texas — In this statutory-construction case, the Court was asked to resolve a narrow issue: whether an employee who is on unpaid leave under the Family Medical Leave Act is "unemployed" as that term is defined in the Texas Unemployment Compensation Act. Julia White, an employee of Wichita County, went on paid leave under the FMLA due to severe anxiety and depression and then unpaid leave when her accrued paid leave ran out. Eventually, White returned to work in a different position, but during her period of unpaid leave, she applied for unemployment benefits. The County argued that White was not eligible for unemployment benefits because she was not "unemployed" under the Texas Unemployment Compensation Act. In a unanimous opinion by Justice Lehrmann, the Supreme Court held that under the unambiguous language of the act, White was "unemployed." The definition of "totally unemployed" under the act is that a person does not perform services for wages in excess of the greater of $5 or 25% of the benefit amount. Under this definition, White was unemployed during the period she was on unpaid leave. Because there are other requirements before an unemployed person is eligible for unemployment benefits, the Court did not address the County's argument that the definition of "unemployed" leads to an absurd result. The Court repeatedly made clear it was not deciding whether White could obtain unemployment benefits, only whether she met the statutory definition of "unemployed," which is just one part of the qualifications for benefits.

No. 17-0146, Bosque Disposal Sys., LLC v. Parker County Appraisal Dist. — In this property tax dispute, the Supreme Court held that, when valuing land that contains a saltwater disposal well, assigning separate appraisal values for the well and the surface is not double taxation. The taxpayers own properties in Parker County that contain saltwater disposal wells, in which wastewater is injected deep underground and permanently stored in the subsurface rock. The Parker County Appraisal District issued separate assessments for the saltwater disposal wells and the surfaces of the tracts. The taxpayers challenged these assessments, arguing that the Tax Code does not permit the county to appraise the wells separately from the land itself when the interests are both owned by the same person and have not been severed into discrete estates. The taxpayers argued that the wells do not fit within any of the categories of “real property” in the Tax Code, and appraising the wells separately from the land effectively appraises—and taxes—the wells twice. In a unanimous opinion by Justice Blacklock, the Supreme Court held that whether an aspect of real property can be separately appraised depends on whether the appraisal of the land itself already accounts for the value of the aspect. If so, separate appraisal would result in illegal double taxation. If not, separate appraisal is permissible to achieve the overall measurement of the property’s market value. The Court determined that in this case, the saltwater wells are part of the real property estates and contribute significantly to the overall market values, which the district is required to appraise. The Court noted that ignoring this economic reality would mean that two properties of similar location, acreage, and other attributes would have the same appraisal value even if one contains a saltwater disposal well and the other does not, which would violate the constitutional requirement that taxation be equal and uniform.